If you've already invested in gold or stocks, cryptocurrency can still be an attractive investment to make your portfolio more diverse and resilient to all market conditions.
Hedge Against Inflation
Due to inflation, the value of Rupiah and other currencies continues to decline, causing prices of goods to rise. At times like these, investing in cryptocurrency protects you from the pressure of inflation that affects fiat currencies.
Legalized in Many Countries
When Bitcoin was first launched as the first cryptocurrency, many people were hesitant to invest in cryptocurrency because these digital assets were not yet monitored by law.
Now, crypto assets are supervised by the Badan Pengawas Perdagangan Berjangka Komoditi (Bappebti). So, investors can purchase and sell cryptocurrency without worry, as there are many legal crypto assets in Indonesia.
High Profit Potential
For many people, the goal of investing is not only to secure funds for the long term but also to make a profit.
For more than a decade since the launch of the first cryptocurrency, crypto investments have generally provided high long-term returns. In fact, they can yield higher returns than traditional asset investments such as gold.
Benefits of Investing in Cryptocurrency
People have long debated the pros and cons of cryptocurrency. Here are some of the advantages of crypto investment that make it so attractive.
Guaranteed Security
In crypto investment, fund transfers between two parties are carried out in a decentralized system secured with public and private keys.
In short, a public key is a code that allows someone to receive currency into their account.
Meanwhile, a private key allows someone to withdraw, spend, or transfer cryptocurrency from their account. These two elements guarantee security in crypto investment.
Does Not Involve A Third Party
Crypto investment takes place in a decentralized system. This means that no banks or financial institutions are acting as intermediaries or regulating transactions.
Why is this considered an advantage? This type of system eliminates the possibility of a single point of failure that could have fatal consequences. For example, in 2008, several of the largest investment banks in the United States went bankrupt, leading to a collapse in the entire economy. This type of situation can be avoided in crypto investments.
Assets Cannot be Counterfeited
Many people remain unaware that counterfeit Rupiah can circulate in the market. Similarly, gold can also be counterfeited.
Cryptocurrencies will not experience this. Cryptocurrency is a virtual asset secured by various cryptographic techniques or algorithmic encryption. This makes it impossible to counterfeit.
Risks of Investing in Cryptocurrency
Although it has many advantages, crypto investment also poses risks. Consider the following before you become an investor.
Transactions are Pseudonymous
Many people assume that cryptocurrency transactions are 100% anonymous, when in fact they are not. Instead, transactions are pseudonymous.
This means that transactions can be made under a false name. Thus, cryptocurrency is prone to being used for illegal activities such as money laundering and transactions involving prohibited goods.
Drains Resources
One common process in cryptocurrency is mining, the process of generating new crypto coins and validating transactions in the blockchain.
Technically, anyone can mine. However, this process requires a computer with powerful processor.
Therefore, the mining process consumes a lot of electricity and water. As a result, those who mine are generally large companies, not individual investors.
Value is Volatile
Once crypto assets are circulating in the public market, their value can fluctuate wildly from day to day. Even major cryptocurrencies like Bitcoin often experience drastic fluctuations in value.
Therefore, one should not be careless when investing in cryptocurrency. An investor must carefully study the market before buying or selling their asset..
Since cryptocurrency is a digital asset, all transactions are conducted virtually. Here are some of the best platforms for crypto investment in Indonesia. Some are registered with Bappebti, while others are global platforms that can be used in Indonesia.
Kraken
Kraken offers a wider selection of coins than most other crypto investment platforms. Through Kraken, investors can choose from more than 440 crypto assets. The trading fees charged for each purchase are also fairly low.
Uphold
Uphold offers more than 250 cryptocurrency options. Investors can also stake more than 20 types of coins.
This platform is suitable for investors who want to trade multiple types of assets at once. Beyond cryptocurrency, you can also invest in stocks and precious metals on Uphold.
Binance
Binance is one of the world’s leading crypto trading platforms and is used in over 100 countries. This platform offers various features, including trading, staking, and yield farming.
In addition, Binance is beginner-friendly. There is a Binance Academy app to learn the ins and outs of crypto investing.
Crypto.com
The Crypto.com investment platform supports transactions in over 400 digital currencies. Investors can earn interest on their assets and even stake over 30 coins.
Like other crypto investment platforms, Crypto.com has platform fees. Users can use Cronos (CRO), the platform's native utility token, to pay these fees.
Coinbase
Coinbase is a US-based crypto investment platform that can also be used in Indonesia. There are more than 340 digital currencies available on this platform. Coinbase also offers a separate digital wallet that supports over 50 digital currencies.
Interactive Brokers
Compared to other crypto investment platforms, Interactive Brokers provides a more limited selection of digital currencies. In addition, this platform has yet to offer a staking feature.
However, Interactive Brokers should still be a worthy consideration, especially for beginners. This is because the platform fees are quite low, and it is integrated with non-crypto assets.
eToro
Although it only offers a selection of 30 types of coins, eToro is suitable for beginners and casual investors. The advantage of eToro is a feature that allows users to copy transactions made by experienced investors.
Risk Management Tips in Crypto Investments
The key to any type of investment is to maximize profits and minimize risk. In crypto investing, there are several risk management methods that beginners can use.
Portfolio Diversification
This strategy applies to all types of investments, not just cryptocurrency. Diversification means spreading your investments across various crypto assets, rather than focusing your funds on a single digital currency.
The goal is to minimize losses in case one of your assets declines in value. Losses on one asset will not have a major impact on the overall portfolio, because we still have a safe hold on other crypto assets.
Utilize Stop-Loss and Take-Profit
Various crypto investment platforms offer stop-loss and take-profit features to limit losses and lock in profits. With stop-loss, investors can set a bottom price point where assets are sold automatically.
For example, an investor buys a coin at $62,000. They can set a stop-loss limit at $60,000. If the price of the coin falls to that level, their assets will be sold automatically before the coin's value declines further and causes greater losses.
Conversely, take profit is a feature that automatically sells assets when the price has risen to the desired target. Using the same example, the investor can set a take profit if the coin's purchase price reaches $66,000.
Leverage Wisely
With leverage, investors can borrow funds from brokers or investment platforms to increase profits. However, this also increases the risk of loss.
Leverage must be used carefully. Only use funds that you can afford to lose if the trade ends in a loss.
Make a Trading Plan
Before investing, create a plan that includes your strategy, targets, and trading rules. For example, set a rule to not risk more than 5% of your capital in a single trade.
With a trading plan, novice investors can avoid impulsive decisions or investments driven by FOMO.
It is also important to maintain your emotions and psychological state when trading. Do not make trading decisions when you are feeling panicked, sad, or angry. Stick to your trading plan with a calm psyche.
FAQ
What is crypto investment?
Crypto investment is an investment in digital currency that does not involve banks or financial institutions, but instead uses blockchain technology for transaction verification and tracking.
What is blockchain?
Blockchain is a type of database for storing and organizing information. Traditional databases organize information in columns and tables, while blockchain organizes information into clusters or blocks.
Once each block reaches full capacity, it is closed and connected to another block, forming a chain.
What is staking?
Staking is the process of locking a certain amount of cryptocurrency in a blockchain network to earn rewards in the form of additional crypto. Staking can be likened to depositing funds in a bank. This is one way to earn passive income through investing in crypto.
What is the difference between trading and investing in cryptocurrency?
Both investing and trading involve buying and selling crypto assets, but investing aims to hold an asset for the long term with the expectation that its value will increase over time.
Meanwhile, crypto trading refers to the buying and selling of digital currencies by taking advantage of price fluctuations over a shorter period of time. Crypto trading involves buying and selling within days, hours, and even minutes.
What are common mistakes that beginner investors should avoid?
Some mistakes crypto investors should avoid include:
- Investing without understanding cryptocurrency technology.
- Giving in to FOMO and making impulsive purchases or sales.
- Investing too much without considering the risk of loss.
- Making investments based on intuition.
Conclusion
Crypto investment offers various advantages, such as high profit potential, secure transactions, and protection of funds from inflation. Of course, there are also risks associated with crypto investments, so investors must make decisions carefully.
If you are a beginner crypto investor, DRX Token is a digital asset worth considering. In addition to investing, trading, and staking, you will receive various DRX Token rewards for being active in the DRX community through the DRX SportNet app. Start your investment journey with DRX today!
